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Dennis Theobald
Education Minister Ron Liepert told Alberta school boards that the province is on the verge of a financial crunch that would force the provincial government to curb spending and Albertans to lower their expectations.
"I believe we have a potential revenue wall coming at us, and it’s not nearly as far out as some people think it is," Liepert said during a meeting of the Alberta School Boards’ Association (ASBA).
Liepert was focussing on the budgetary implications of recent increases in the Canadian dollar relative to the American dollar. Sales of gas and oil are usually denominated in American dollars, so when the Canadian currency increases in value, energy firms earn fewer Canadian dollars from the export of oil and gas to US markets. As a result, the revenues returned from energy exports decline, potentially reducing the amount the province collects in royalties and taxes. Alberta Finance projects that every one cent increase in the value of the Canadian dollar costs the provincial treasury about $123 million in lost revenue. Liepert and Finance Minister Oberg were speculating that the cost to the province of the strengthening Canadian dollar could be as much as one billion dollars.
Of course, there are other factors affecting the province’s fiscal health that the minister failed to mention, not least of which is the price of oil and gas. The 2007 Alberta Budget projects that a US$1 increase in the price of oil will increase provincial revenues by C$139 million, while each 10 cent increase in natural gas prices will generate an additional C$98 million. As oil is already trading at US $6 more than was budgeted for and natural gas at C$1.60 more, the province is once again positioned to reap billions in surplus revenues. This is nothing new. As of the last fiscal update, released in February, the province was on track to amass a $7 billion surplus, an increase of $2.9 billion over the amount originally budgeted and $1.5 billion more than was forecast in mid-November, and this is despite significant mid-year increases in spending.
The minister was clearly seizing on the potential threat posed to the province’s revenues by the rise in the value of the Canadian dollar to justify his government’s decision to limit the increase in education grants to 3 per cent, roughly one half the rate of inflation. Apparently the minister believes that school boards should begin preparing now for leaner times to come. School trustees were sceptical, pointing out that the increases in costs were very real and largely beyond their control. Even demands for increases in salaries were being driven largely by the rising cost of living.
Most Albertans believe that the province must begin now to prepare for the inevitable transition to a post-oil future. ATA President Frank Bruseker commented: "The ability of the province to make this transition successfully will largely depend upon ensuring that Albertans have the education and skills to innovate and compete in a time of great change and uncertainty. This, in turn, requires investment in early childhood, schools and postsecondary education. Helping these areas keep up with rising costs is the very minimum that the province can do, and the province should do much better."
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